0 identifying distributed energy resources research priorities through emerging value networks 2005...

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Identifying Distributed Energy Resources Research Priorities Through Emerging

Value Networks

2005 Update

Prepared for the

Energy Systems Integration Research Program Area

Public Interest Energy Research (PIER) Program

California Energy Commission

2

This document was prepared by:

Comments or questions about this document may directed to:

Mark RawsonProgram Manager, DER Integration ProgramEnergy Systems IntegrationPublic Interest Energy ResearchCalifornia Energy Commission1516 Ninth Street, MS 43Sacramento, CA 95814(916) [email protected]

Acknowledgements

Navigant Consulting, Inc.One Market StreetSpear Tower, Suite 1200San Francisco, California94105(1) 415-356-7100

March, 2005

Reference: 116748

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3 DER Value Networks

2 DER Research Initiatives

4 ESI DER Research Priorities

1 Introduction

5 Appendix

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This report updates the Value Networks analysis from 2002 to identify the current high priority research initiatives.

• In 2002, the DER Integration program needed a tool that could deal with the uncertainties inherent in DER and provide enough detail to inform decision-making.

• To address this need, DER Integration developed the ‘Value Networks’ tool to prioritize research initiatives

• The objective of this document is to update the 2002 analysis and identify the current high priority research initiatives in DER

Introduction

5

The DER Integration program follows a five step process to fund public interest research.

Introduction

Assess DER Research Activity

Identify Priority Projects

Define RFPs and Fund Projects

DER Integration Major Program Planning and Implementation Steps

Ongoing Revisions to Portfolio of

Projects

Identify Priority Research Initiatives

The future of DER is driven by technology, regulatory and market uncertainties that make investment decision-making difficult.

6

DER Integration needed a tool that could deal with the uncertainties inherent in DER with enough detail to inform decision-making.

Introduction

Spectrum of AnalysisAvailable Tools Characteristics

Macro / Broad

Micro /Narrow

Scenarios

Business Models

Strengths:• Dealing with uncertainties – looks at trends in

macroeconomic environment and how they will impact development of DER

• Good developing and testing corporate strategies

Weaknesses• Lack detail to understand how DER will be

deployed • Too broad for tactical decisions on technology

Strengths:• Looks at different ways of how industry participants

can create, sell and deliver a product and/or service • Good for tactical decision making on a particular

technology or for an individual company• Useful to understand the needs of key industry

participantsWeaknesses:• Too narrow focus to capture broader industry and

technology needs and trends

?

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Introduction

Spectrum of AnalysisAvailable Tools Characteristics

Macro / Broad

Micro /Narrow

Scenarios

Business Models

Value Networks

• Looks at how business models interact to create a value proposition to customers

• Acknowledges the number of “miracles” that have to occur for technologies to be commercialized

• Analyzes the impact of different scenarios on emerging value networks

• Allows ESI to identify the value networks that are more attractive for PIER

• Allows ESI to identify the importance of each DER research initiative to value networks

* Value Networks are defined as the story of how emerging business models interact with one another to create, sell and deliver DER products and services.

As a result, DER Integration developed the Value Networks* tool to manage uncertainty with enough detail to make technology investment decisions.

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Energy Cost Saver Value Network

Technology and Infrastructure

Rules andRegulation

End-user Customer Needs

Constraints

Energy Consumers

A Value Network is the story of how business models and technologies interact with one another to create, sell and deliver value to customers.

Energy Services

Owner/Operator

Microturbine Supplier

SOFC Supplier

Recip Engine Suppliers

Project Developer

Cogen Packager

Distributor

Interconnection

Electric Distribution Company

• Partnerships and acquisitions• Technology commercialization • Competitive position

• Technology gaps • Constraints • Focuses on value to customer

Uses

Introduction

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The analysis follows a logical path from the the research gaps and value networks to define the research priorities.

Analysis

Priority Research Initiatives

Importance of Research Initiatives

Attractiveness of Value Network

Appropriateness of Research Initiatives for

Public Funding

Technical Market Scale

Fit with PIER’s Objectives

Feasibility

Size of Gap

Competitive Impact

Stage of Technology

Development

As

se

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Introduction

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This document will identify the current high priority research priorities in DER.

Introduction

• Update the research initiatives appropriate for public funding based on the Updated Assessment Report1

• Review the value networks and their current attractiveness to the CEC’s PIER program

• Identify ESI’s DER research priorities based on DER research gaps and emerging DER value networks

Document Objectives

1. 2003 Update to the 2001 DER Research Assessment Report (http://www.energy.ca.gov/reports/2004-08-30_500-04-059AD.PDF)

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1 Introduction

5 Appendix

12

4

Commercial Demonstration Development Research

Emerging

Pacing

Key

Base1

23

109 11

12

56

7

13

14 15

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There are six initiatives in Interconnection appropriate for public funding with significant or moderate gaps1.

DER Research Initiatives Interconnection

Significant gap

Moderate gap

Little or no gap

Appropriate Public Funding 1. 2003 Update to the 2001 DER Research Assessment Report (http://www.energy.ca.gov/reports/2004-08-30_500-04-059AD.PDF)

13

4


Emerging

Pacing

Key

Base1

23

109 11

12

56

7

13

14 15

8

During the 2003 research assessment update1, three interconnection research initiatives changed from significant to moderate gap.

DER Research Initiatives Interconnection Difference from 2002 Analysis

Significant gap

Moderate gap

Little or no gap

Appropriate Public Funding 1. 2003 Update to the 2001 DER Research Assessment Report (http://www.energy.ca.gov/reports/2004-08-30_500-04-059AD.PDF)

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Standardization and Adoption of New Requirements and Processes1 Standardize technical requirements, processes and contracts for interconnection (including networked

systems and power export) that allow for innovative solutions

2 Understand impact of and adopt new interconnection requirement

3 Standardize designs around new requirements

4 Type testing and certification of interconnection solutions

5 Develop guidelines and best practices for interconnection

6 Modify standardized requirements and standardized designs based on modeling, testing and field experience

7 Educate stakeholders on new requirements, contracts and processes

8 Develop standardized products for small DER

Compatibility14 Develop test protocols for compatibility and power quality testing of DER

15 Test and understand compatibility and power quality issues

Cost Reduction and Product Improvement Reduce costs of interconnection components

Improve reliability and performance of interconnection components (e.g., power electronics)

Integrate interconnection functions with other DER functions

Turnkey solutions that integrate DER functions

Develop new technologies that would eliminate or reduce some requirements or costs of interconnection

Research Initiatives

1

2

3

4

5

6

7

8

9

10

11

12

13

15

14

DER Research Initiatives Interconnection

15


Emerging

Pacing

Key

Base

2

6

89

1

4511

7

10

3

12

DER Research Initiatives Grid Effects

Significant gap

Moderate gap

Little or no gap

Appropriate Public Funding

There are eight initiatives in Grid Effects appropriate for public funding with significant or moderate gaps1.


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Emerging

Pacing

Key

Base

2

6

89

1

4511

7

10

3

12

DER Research Initiatives Grid Effects Difference From 2002 Analysis

Significant gap

Moderate gap

Little or no gap


During the 2003 research assessment update1, grid effects initiative #12 was added while initiative #2 reduced its gap and initiative #10 increased it.


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Grid Effects Research Initiatives

Modeling and Testing

Model and analyze the grid with varying levels of DER penetration

Demonstrate and test varying levels of DER penetration in a distribution system

Modify distribution system design approaches

System Impact Studies

Develop models to understand system impacts

Develop software to facilitate impact studies

Modify requirements for impact studies as appropriate

Microgrids

Model and analyze microgrids

Demonstrate and test microgrids

Develop design guidelines for microgrids

Wires Company Information Needs

Perform analysis of the information and data needs of wires companies

Develop and demonstrate systems for wires companies to monitor DER

Develop tools to evaluate DER solutions vs. traditional T&D investments

1

2

3

4

5

6

7

8

9

10

11

12

DER Research Initiatives Grid Effects

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Emerging

Pacing

Key

Base

2 3 4

7a8

9 1011

12

13

1

6

14

5

7b7c

DER Research Initiatives Market Integration

Significant gap

Moderate gap

Little or no gap


There are eleven initiatives in Market Integration appropriate for public funding with significant or moderate gaps1.


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Emerging

Pacing

Key

Base

23

4

7a8

9 1011

12

13

1

6

14

5

7b7c

DER Research Initiatives Market Integration Difference from 2002 Analysis

Significant gap

Moderate gap

Little or no gap


During the 2003 research assessment update1, the gap for market integration initiative #7 was reduced while for #14 was increased.


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Market Integration Research Initiatives

Current Market

Assess current wholesale market rules for applicability to DER

Modify market rules as appropriate to reduce the participation costs (fees, metering, process) for DER

Reduce costs by creating critical mass through a demonstration program

Integrate the required technologies to reduce costs of participating in markets

Assess requirements for tariffs or rates

Develop market mechanisms to capture and monetize additional DER benefits (e.g., T&D, reliability, environmental, CHP, etc.)

Enabling Technologies

Demonstrate aggregation and control of DER

Develop low cost metering

Develop low cost communications and control

Develop software to optimize DER in response to market price signals

Develop standards/protocols for communications/control

Develop advanced storage to optimize DER in response to market price signals

Advanced Market Concepts

Launch a new market for DER that captures all value generateda Start from scratch, develop the best market structure for DER now and in the futureb Assess the system requirements for communications, control, metering, software for billing and

settlementc Pilot and then launch

Develop advanced control and optimization approaches and technologies (including neural networks and intelligent software agents)

1

2

3

4

5

6

7

8

9

10

11

12

13

14

DER Research Initiatives Market Integration

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In addition to the research assessment initiatives, the analysis identified 6 broader research initiatives that are also appropriate for public research.

DER Research Initiatives Additional Initiatives

1. Major cost, emissions and performance breakthroughs are pacing, incremental improvements are key technologies

Significant gap

Moderate gap

Little or no gap


DER Technologies and Products

Reduce equipment and installation costs of DER technologies

Increase efficiency of DER technologies

Reduce emissions from DER technologies

Improve and demonstrate increased reliability of DER technologies

Develop robust service infrastructure

Develop zero energy buildings

2

5


Emerging

Pacing

Key

Base

Stage of Technology Development

Co

mp

etit

ive

Imp

act

1

2

3

5

Regulatory/Institutional

Allow utility ownership

Exempt DER from exit fees or standby charges

Reduce regulatory uncertainty

Create CA DG municipal utilities and/or power authority

Provide preferences or subsidies for clean DER

Revise building codes and standards for DG

DG Enterprise zones

6

8

9

10

11

12

Fuel Infrastructure

Develop a robust natural gas infrastructure

Develop a hydrogen infrastructure

15

16

11

21

5

31

6

8 9

10

11

12

15

11

21

31

16

7

7

13

14

13 14

Additional Research Initiatives

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1 Introduction

5 Appendix

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Energy Cost Saver

Perfect Power

Energy Supply & Delivery

Green Power

DER Exchange

Value Convergence

The California Energy Commission and Navigant Consulting identified six value networks for distributed energy resources in California.

Value Proposition Customer

Lower cost generation, transmission and/or distribution

Improved environment or satisfy mandates

Enable other value networks

Enable other value networks

Improved reliability and/or higher power quality Energy consumers

Society, Energy Consumers. Energy suppliers

Energy suppliers and delivery companies

All of the above

All of the above

Reduced energy costs Energy consumers

DER Value Networks Definition

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Four value networks have a target market segment and a value proposition, and could exist independent of each other.

Value Network Market Segment Value Proposition


Energy Cost Saver Energy consumer

Perfect Power

Green Energy

Energy Supply & Delivery

Energy consumer

• Society - install clean DER that will displace emissions and save energy• Energy Supply - sell output of DER that will satisfy Renewable Portfolio

Standards (RPS) or emissions credits that were created by DER at reasonable cost to energy supply companies

• Consumer - sell customers clean energy via DER products or services

Society, energy supplier, energy consumer

Provide energy supply and delivery companies with a lower cost generation, transmission and/or distribution alternative to traditional solutions. Other related benefits include better asset utilization, increased system capacity, improved system performance and a tool for maintenance and financial management

Provide energy consumers with perfect power via a DG product or service. Perfect power is defined as power that is more reliable (>99.9% availability) and/or of higher quality.

Provide energy consumers with electricity, thermal energy and reliability at reduced costs and lower risks. The applications will include peak shaving, base load and cogeneration.

Energy supplier and deliverer

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The other two value networks provide a market mechanism or market condition to enable or combine the other value networks.

Value Network Market Segment Value Proposition


DER Exchange

Value Convergence

• Provide the market mechanism for selling high value, wholesale capacity and energy to energy suppliers and energy delivery companies

• Provide the market mechanism for energy supply and delivery companies to engage in transactions for emissions credits, T&D benefits, and green power.

This value network is the intersection of 2 or more value networks. It would allow buyers/sellers to engage in transactions across value networks. This allows different values to be delivered to more than one customer from the same DER unit at times simultaneously. Some examples include:

• An energy consumer that installs a CHP system to reduce its energy costs is participating in the Energy Cost Saver value network. This consumer receives payment from the local distribution company for T&D benefits, thus also participating in the Energy Supply and Delivery value network.

• A distribution company that installs a PV system on a remote feeder to defer a T&D investment is participating in the Energy Supply and Delivery value network. It also participates in the Green Power value network by selling the green power produced by this PV system to its customers.

• A DER developer that installs and owns a CCHP system and provides premium power to an internet hotel in Phoenix is participating in the Perfect Power value network. The developer sells the CO2 credit s to an industrial facility in China, thus participating in the Green Power value network. The developer has oversized the system and sells this excess power to the DER Exchange.

All market segments

Energy supplier and deliverer

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The Energy Cost Saver and the Energy Supply & Delivery value networks have the highest technical market potential.

Scale Definition Energy Cost Saver

Relative Technical

Market ScaleHigh

Energy Supply& Delivery DER ExchangeGreen Power Value

Convergence

Value Networks Scale

Perfect Power

Low Medium High Medium Medium

Technical Market

PotentialAnalysis

Assume that all loads could be supplied with a DER system

Total California load = ~277 TWh/year

(2003 Net System Power Calculation Report, Energy Commission Publication # 300-04-001R)

Because DER solutions exist in the marketplace, assume that everyone with perfect power needs has a solution

Existing standby genset capacity = ~3.2GW

Assume that UPS systems that don’t use a genset roughly equal those that do.

Total = 6.4 GW

Because UPS systems are always providing protection, assume capacity factor = 100%

= 56 TWh/year

The Green Power includes the technical market potential for both CHP and PV

Technical potential for CHP <20MW is 13.4 GW (2005 EEA CHP Market Assessment Report). Assuming a 70% capacity factor, provides 82TWh/year

PV technical potential covering all rooftops that have PV access ~ 6,000 million sq. ft. (Grid Connected PV Market Potential, NCI 2004). = 60 GW @ 20% CF = 105 TWh

Total CHP + PV = 187 TWh

Assume that all loads could be supplied with a DER system

Total California load = ~277 TWh

Assume that all loads are supplied by DER (277 TWh evenly split among three value networks: ECS, green power and ESD. Assume 10% of the ECS, 75% of the green power and 100% of the ESD is sold through the exchange.

ECS = (277/3*10%) = 9 TWh

Green = (277/3*75%) = 70 TWh

ESD = (277/3*100%) = 92 TWh

Total = 171 TWh

It is difficult to estimate the technical market for this value network.

A high rating would require the majority of the Energy Cost Saver and Energy Supply and Delivery value networks to converge or all of the Green Power or DER Exchange to converge with another value network.

DER Value Networks Technical Market Scale

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The Energy Cost Saver and DER Exchange value networks have the highest fit with PIER’s objectives.

PIER Objectives Energy Cost

Saver

Low Cost Power ++


Convergence

Reliable Power

Reduce Environmental

Impact

Increased Safety

Value Networks Fit Assessment

Perfect Power

- + +

+ ++ + +

+ + +++

~ ~ ~ ~~

+ +

~

-

~

+

+

Very Positive: ++ Positive: + Neutral: ~Negative: - Very Negative: --

DER Value Networks Fit with PIER’s Objectives

High Medium Low Medium MediumLow MediumRelative Fit

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The Perfect Power value network has the highest feasibility*.

Energy Cost Saver

Significant Gaps 3


Convergence

Moderate Gaps

Number of Initiatives NOT appropriate for Public Research that are Necessary for that Value Network

Perfect Power

0 3 5

6 4 4 4

1

1

+2***

+2***

DER Value Networks Feasibility

Low High Medium Low LowHigh Low****Relative Feasibility

Assessment of Necessity, gap, competitive impact and stage of technology development for every research initiative included in Appendix

** In calculating relative feasibility, significant gaps had double the weight of moderate gaps

*** Gaps under value convergence considered in addition to gaps in at least two other value networks

* Feasibility defined as the probability of development of the value network assuming the public sector closes the research gaps appropriate for public funding (i.e., how much R&D will be required by the private sector in addition to public sector R&D)

**** Considered low as it requires convergence of multiple value networks

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The Energy Cost Saver and the Energy Supply & Delivery value networks are the most attractive for PIER and ESI.

DER Value Networks Attractiveness

CriteriaEnergy Cost

SaverEnergy Supply

& Delivery DER ExchangeGreen Power Value Convergence

Value Networks Attractiveness

Perfect Power

Relative Technical

Market ScaleHigh Low Medium High Medium Medium

High Medium Low Medium MediumLow MediumRelative Fit

Low High Medium Low LowHigh LowRelative Feasibility

High Medium Low Medium High LowMedium LowRelative Attractiveness*

* Relative attractiveness was calculated by averaging the scores for scale, fit and feasibility (all with the same weight) and normalizing the result.

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1 Introduction

5 Appendix

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We have identified ESI’s DER research priorities based on DER research gaps and emerging DER value networks.

• Evaluated necessity of research initiatives to each value network– Integration– Grid Effects– Market Integration– Additional Initiatives

• Calculated importance of each research initiative by combining the necessity of the research initiative with the attractiveness for each value network

• Assessed the research priority based on importance of each research initiative and the size of the research gap

ESI DER Research Priorities Introduction

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The relative importance score is based on a simple weighted average calculation and the application of a relative importance scale.

Illustration

Raw Importance Score

ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

Necessity to Each Value

Network

4

2

2

0

2

2

Attractiveness of

Value Network

5

2

3

4

1

1

X =

20

4

6

0

2

2

34Total

Relative Importance Scale

RelativeScore

High

MediumHigh

Medium

MediumLow

Low

LowerLimit

51

40

30

19

8

UpperLimit

90

50

39

29

18

Note: Highest raw score 60 Lowest raw score 8

NecessaryHelpsUnimportant

Necessity to Value Network

5 = High3 = Medium1 = Low


0 = 2 = 4 =

ESI DER Research Priorities Calculation

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One research initiative in interconnection has medium high importance.

ESI DER Research Priorities Importance Interconnection

ValueNetworks 2 5

Relative Importance

Medium Medium Low Medium MediumHigh

7

Medium

Interconnection

Understand impact of and adopt new interconnection requirement

2


Develop guidelines and best practices for interconnection

Modify standardized requirements and standardized designs based on modeling, testing and field experience

Educate stakeholders on new requirements, contracts and processes

Develop standardized products for small DER

Develop new technologies that would eliminate or Reduce some requirements or costs of interconnection

7

8

13

6 8 13

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence



HighMediumLow

Attractiveness of Value Network Significant Gap

Moderate Gap

5

6

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Four research initiatives in Grid Effects have medium high importance.

ESI DER Research Priorities Importance Grid Effects

ValueNetworks

Relative Importance


Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

Grid Effects

Demonstrate and test Microgrids 8

28 1 4 5


Necessity to Value Network Significant Gap

Moderate Gap

10 11


Demonstrate and test varying levels of DER penetration in a distribution systems






1

4

5

12

10

11

MediumLow


High

2

Medium

12

MediumHigh

MediumHigh Medium Medium Medium

HighMedium

High Medium

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One research initiative in Market Integration has high importance and two have medium high importance.

ESI DER Research Priorities Importance Market Integration

ValueNetworks

Relative Importance

MediumHigh High Medium Medium MediumMedium


Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

3 7a6 4 7c7b 8 111014 12

MediumHigh Medium Medium

LowMedium MediumLow


Necessity to Value Network Significant Gap

Moderate Gap

*Se

e n

ext

pa

ge

fo

r d

esc

riptio

ns

of

rese

arc

h in

itia

tive

s

MediumLow


High

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Continued…

ESI DER Research Priorities Importance Market Integration

Market IntegrationDemonstrate viability of a value network through a replicable pilot program



3

6

14


Launch a new market for DER that captures all value generated a. Start from scratch, develop the best market structure for DER now and in the future

Assess the system requirements for communications, control, metering, software for billing and settlement

Pilot and then launch

Develop advanced control and optimization approaches and technologies




4

7b

7c

8

10

11

12

7a

Significant Gap

Moderate Gap

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Two research initiative among the recent additions has high importance.

ESI DER Research Priorities Importance Additional Initiatives

ValueNetworks



Relative Importance


Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence







Fuel Infrastructure


1

2

3

5

16

7

167 1 2 3 5

Significant Gap

Moderate GapMediumLow


High

Low Low High Medium High Medium

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The priority of research initiatives combines the importance with the size of gap.

ESI DER Research Priorities Results

Decision Process




Appropriateness of Research Initiatives for

Public Funding

Technical Market Scale

Fit with PIER’s Objectives

Feasibility

Size of Gap

Competitive Impact

Stage of Technology

Development

As

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There are thirteen research initiatives that are high priority, based on the relative gap and importance.



2

5

6 7

813

8

1

2

4

5

10

1112

3

6

14

4

7a

7b

7c8

10

1112

7

16

1

2

3

5

Relative Importance

Relative Size of Gap

Interconnection

Grid Effects

Market Integration

Other Initiatives

Significant

Moderate

Low Medium High

Develop market mechanisms to capture and monetize additional DER benefits

Reduce cost by creating critical mass through demonstration program

Reduce equipment and installation cost of DER technologies










Develop new technologies that would reduce requirements or costs of interconnection

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Compared to the 2002 results, four initiatives were added to the high priority list, while four initiatives were taken out.

ESI DER Research Priorities Difference from 2002 Analysis

Changes from 2002 Prioritization of Research Initiatives

2

5

6 7

813

8

1

2

4

5

10

1112

3

6

14

4

7a

7b

7c8

10

1112

7

16

1

2

3

5

Relative Importance

Relative Size of Gap

Interconnection

Grid Effects

Market Integration

Other Initiatives

Significant

Moderate

Low Medium High

Develop market mechanisms to capture and monetize additional DER benefits

Reduce cost by creating critical mass through demonstration program

Reduce equipment and installation cost of DER technologies










Develop new technologies that would reduce requirements or costs of interconnection

7





41


Interconnection


2

Develop guidelines and best practices for interconnection

Modify standardized requirements and standardized designs based on modeling, testing and field experience

Educate stakeholders on new requirements, contracts and processes

Develop standardized products for small DER

Develop new technologies that would eliminate or Reduce some requirements or costs of interconnection

7

8

13

5

6

Grid Effects

Demonstrate and test Microgrids 8


Demonstrate and test varying levels of DER penetration in a distribution systems






1

4

5

12

10

11

2

Market IntegrationDemonstrate viability of a value network through a replicable pilot program



3

6

14



Assess the system requirements for communications, control, metering, software for billing and settlement

Pilot and then launch





4

7b

7c

8

10

11

12

7a







Fuel Infrastructure


1

2

3

5

16

7

Significant Gap

Moderate Gap

42

Appendix

5 Appendix

5.2

Summary of Value Networks Assessment

Assessment Tables of Research Initiatives

5.1

43

Business models are driven by customer needs, technology, infrastructure and regulations.

We can’t change customer needs, but we can understand them and change or influence technology, infrastructure, and regulations.

Business ModelsPerformance Value

Constraints

TechnologyInfrastructure

“What can I offermy customers?”

“What do mycustomers want?”

“What are thelimitations ?”

CustomerNeeds

Regulations

Appendix Value Networks Assessment

44

Lack of available business models is inhibiting the development of the DER industry.

• The DER industry needs new business models

– Innovation around business models is just as important as the technology

– DER will likely need to iterate around a number of business models

– The greater the number of available business models, the more successful DER will ultimately be as stakeholders figure out what works over time.

• Business models are limited by technology, infrastructure and regulatory constraints

• By examining business models, we will uncover what technology, infrastructure, and regulatory changes must be made to bring into existence numerous accessible and robust business models.


45

Key Definitions

Business Models* - define how a company makes money

The functions of the business model are to:

• Articulate the value proposition, that is, the value created for users by the product and/or service offering

• identify a market segment, that is the users, to whom the technology is useful and for what purpose

• define the structure of the value chain required to create and distribute the offering

• estimate the cost structure and profit potential of the offering, given the value proposition and value chain structure chosen

• describe the position of the firm within the value network linking suppliers and customers, including identification of potential complements and competitors

• formulate the competitive initiative by which the innovating firm will gain and hold advantage over rivals

Value Networks - A value network is defined as the story of how value (i.e., products and services) is created, sold and delivered to customers. A group of business models that interact to support a value proposition to a “DER user” market segment (e.g., energy supply, energy delivery, energy consumer, society)

• A particular model may be found in several value networks

• There may be some business models that only exist in a particular Value Network

*Source: Chesbrough, Henry and Richard Rosenbloom, 2001. “The Role of the Business Model in Capturing Value from Innovation: Evidence from Xerox Corp’s Technology Spinoff Companies”. Harvard Business School: Boston, MA.


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There are different values that DER can provide in the energy market.

DescriptionValues


Reliability / Power Quality

Energy Cost Savings

T&D Benefits

Environmental

Energy Security

Flexibility

Capital Management

Resource Management

Asset Value

Capacity

Energy Sales

Reliability is the ability to provide customers with continuous power. Power quality is the ability to provide voltage and current that is free from harmonics, dips, sags and spikes.

Reducing energy bills including fuel, electricity and thermal

Congestion relief, T&D deferral, improved reliability, avoided line losses, avoided T&D siting, VAR support, improved reliability

Reduce emissions and other environmental impacts

Ability of the system to withstand sudden losses in system components

The ability to respond to changing market conditions

Optimizing investment capital to produce highest return

Extracting maximum value from resources other than (energy or capital)

Unlocking additional worth from an asset by increasing its functionality and extending its life

The physical ability of the system to delivery energy (measured in MWs)

Revenues from kWhrs produced and delivered

47

The market segment are the groups of users to whom the technology is useful.

DescriptionMarket Segments


Power producers and energy service companies that produce electricity (central or distributed) and sell it in wholesale or retail markets

Wire companies, including Local Distribution Utilities (LDUs) and transmission companies that deliver power from generation sources to the loads connected to the grid

End-users of energy for industrial, commercial and residential applications.

Broad population, typically represented by advocacy groups with social and environmental interests.

Energy Supply

Energy Delivery

Energy Consumer

Society

48

Value networks can be identified by examining the values that DER can provide to the different market segments.

Energy Supply Energy Delivery Energy Consumer Society

Market SegmentsValues

Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—**

-

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —

(niche* )

— —

—


* For example, black liquor is a by-product in the paper pulping process that is used to produce electricity in steam turbine plants** Non-applicable

StrongWeakFit

49

The Energy Cost Saver is a Value Network that focuses on a single value and market segment.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—

-

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —

(niche ) Job Creation Activity

— —

—


50

Value Network Energy Cost Saver Market Segment(s) Energy Consumer

Value Proposition(s)

Provide energy consumers with electricity, thermal energy and reliability at reduced costs and lower risks. The applications will include peak shaving, baseload and cogeneration.

Current Use

Primary Energy (NiSource subsidiary) - Develops, engineers, and installs cogeneration plants in large and medium scale industrial/commercial operations. Designs turnkey solutions and uses its own capital Trigen - developer, owner and operator of industrial, commercial/institutional, government and district energy systems in North America. Combined heat and power (CHP) systems and reliable utility solutions.Real Energy - Designs, installs, capitalizes, operates, and maintains micro-generation systems. Provides lower cost energy for commercial properties without added risk and responsibility.

Mature

Current Examples

Supplier-Customer Linkages

Equipment Supply and Installation

Operator

Wires Company Consumer

Owner

Fuel Supply and Delivery

Service

Equipment sale or lease

Bi-lateral contract based on shared

savings

Fuel sales

Service agreement

Supplemental electricity and

standby power

Operating agreement

Operating agreement or sale of energy

Key Customer Relationships

• Option 1: The consumer may be the consumer, owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.• Option 2: The consumer might buy all or part of their energy from a separate DER owner and/or operator. This owner and/or operator might be the equipment supplier, fuel company, wires company or a third party.


51

Option 1 Supplier-Customer Linkages


Operator


Owner


Service



savings

Fuel sales

Service agreement


standby power

Operating agreement




Operator


Owner


Service



savings

Fuel sales

Service agreement


standby power

Operating agreement


Option 1 Key Customer Relationships

The consumer may be the consumer, owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.


The consumer might buy all or part of their energy from a separate DER owner and/or operator. This owner and/or operator might be the equipment supplier, fuel company, wires company or a third party.


52

The Perfect Power value network provides high quality power to consumers.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —


— —

—

-


53

Value Network Perfect Power Market Segment(s) Energy Consumer


Provide energy end-users with perfect power via a DG product or service. Perfect power is defined as power that is more reliable (>99.9% availability) and/or of higher quality.

Current Use

Calpine (c*Power) -Provides high-quality critical power to technology customers who require 99.9999 percent reliability. For Example, Calpine is developing the 180-megawatt Los Esteros Critical Energy Facility. Located in San Jose, California. Calpine's c*Power program will supply U.S. Data Port's planned San Jose Internet Campus with highly reliable critical power and ancillary services.SurePower - Builds, operates and maintains primary power systems delivering computer-grade electricity with 99.9999% availability

• Limited as a product• Embryonic as a

service

Current Examples



Operator


Owner


Service


Bi-lateral contract based on

delivered energy

Fuel sales

Service agreement

Back-up Power

Operating agreement

Operating agreement or sale of high

quality energy


• Option 1: The consumer may be the consumer, owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.• Option 2: The consumer might buy all or part of their energy from a separate DER owner and/or operator. This owner and/or operator might be the equipment supplier, fuel company, wires company or a third party.


54



Operator


Owner


Service



savings

Fuel sales

Service agreement


standby power

Operating agreement




Operator


Owner


Service



savings

Fuel sales

Service agreement


standby power

Operating agreement



The consumer may be the consumer, owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.


The consumer might buy all or part of their energy from a separate DER owner and/or operator. This owner and/or operator might be the equipment supplier, fuel company, wires company or a third party.


55

The Energy Supply and Delivery value network provides multiple values to the energy supply and energy delivery market segments.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security

Reliability / Power Quality -

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —


— —

—

—


56

Value Network Energy Supply and Delivery

Market Segment(s) Energy Supply and Delivery


Provide energy supply and delivery companies better asset utilization, increased system capacity, improved system performance and a tool for maintenance and financial management

Current Use

Commonwealth Edison, Sawnee Electric Cooperative, Indianapolis Power & Light, Wisconsin Public Service, CMS Energy rent mobile diesel engines and gas turbines from Aggreko, GE, Cummins and Caterpillar for capacity and system support during peak periods

Limited

Current Examples


Operator

Owner

System Operator

Consumer

ServiceAggregator/

BrokerEnergy Delivery


Equipment

EnergySupply


• Option 1: The energy supply or delivery companies may be the owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.• Option 2: The energy supply or delivery companies may be the operator and aggregator/broker of the DER and buy the DER output form the owners of the DER • Option 3: The energy supply and delivery companies may buy the DER output from DER owners or aggregator/brokers


57


Operator

Owner

System Operator

Consumer

ServiceAggregator/



Equipment

EnergySupply


The energy supply or delivery companies may be the owner and operator of the DER and purchase the equipment, fuel, services and supplemental power from others.


Operator

Owner

System Operator

Consumer

ServiceAggregator/



Equipment

EnergySupply


The energy supply or delivery companies may be the operator and aggregator/broker of the DER and buy the DER output from the owners of the DER


58


Operator

Owner

System Operator

Consumer

ServiceAggregator/



Equipment

EnergySupply


The energy supply and delivery companies may buy the DER output from DER owners or aggregator/brokers


59

—

The DER Exchange value network provides a limited number of values to the energy supply and energy delivery market segments.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—

-

—

—

Capacity

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —

(niche )

— —

—


60

Value Network DER Exchange Market Segment(s) Energy supply, Energy delivery


•Provide the market mechanism for selling high value, wholesale capacity and energy to energy suppliers and energy delivery companies•Provide the market mechanism for energy supply and delivery companies to engage in transactions for emissions credits, T&D benefits, and green power.

Current Use Pilot

Current Examples

• Wholesale power trading operations• CAL-ISO Aggregated Distributed Generation Pilot Project (ADGPP)• Apogee Interactive’s Demand Exchange - Currently operating over two dozen separate exchanges. The Demand

Exchange® includes electric utility customers as active trading partners in the wholesale market for electricity the world. Customers indicate their specific action plans based on market conditions. The economic benefits to the customer show up cash/credits on their electric bill.


Energy SupplyOperator

Aggregator

Owner

Services

Energy Delivery


• Option 1: The energy supply or delivery companies buy the DER output from an aggregator • Option 2: The energy supply and delivery companies buy the DER output from DER operators/owners


61



Aggregator

Owner

Services

Energy Delivery


The energy supply or delivery companies buy the DER output from an aggregator



Aggregator

Owner

Services

Energy Delivery


The energy supply and delivery companies buy the DER output from DER operators/owners


62

The Green Power value network provides focused value to a number of market segments.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—

-

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —


— —

—


63

Value Network Green Market Segment(s) Society, Energy Supply, Energy Consumers


• Society - install clean DER that will displace emissions and save energy

• Energy Supply - sell output of DER that will satisfy Renewable Portfolio Standards (RPS) or emissions credits that were created by DER at reasonable cost to energy supply companies

• Consumer - sell customers clean energy DER products or services

Current Use Limited, Established

Current Examples

• Renewable Portfolio Standards (RPS) in 8 states and renewable funds in 14 states• Introduction of green pricing and alternative fuel incentives• 80+ utilities offer green pricing• 30 states with net metering


Owner

Marketer Aggregator

Verification

Gov’tControlled

Market Structure

Energy Supply

Consumer

Society


• Option 1 (red): Society via government influenced market structure that incentivizes owners to install DER

• Option 2 (blue): Energy supply companies buy the output of green DER from owners or aggregators that satisfy renewable portfolio standards

• Option 3 (green): Consumers buy green power from DER owners or green marketers.


64


Owner

Marketer Aggregator

Verification

Gov’tControlled

Market Structure

Energy Supply

Consumer

Society


Society via government influenced market structure that incentivizes owners to install DER


Owner

Marketer Aggregator

Verification

Gov’tControlled

Market Structure

Energy Supply

Consumer

Society


Energy supply companies buy the output of green DER from owners or aggregators that satisfy renewable portfolio standards


65


Owner

Marketer Aggregator

Verification

Gov’tControlled

Market Structure

Energy Supply

Consumer

Society


Consumers buy green power from DER owners or green marketers.


66

The Value Convergence value network provides multiple values to the various market segments.



Energy Cost Savings

T&D Benefits

Environmental

Energy Security


—

-

—

—

Capacity —

Flexibility

Capital Management

Resource Management

Asset Value

Energy Sales

—

/ —


— —

—


67

Value Network Value Convergence

Market Segment(s) All


This value network combines the value propositions from all the other value networks. In addition, it allows different values to be delivered to more than one customer from the same DER unit at times simultaneously. Thus this value network maximizes the benefits of DER and optimizes DER units.

Current Use Non-existent in energy


DER Owners

Society

ConsumerEnergy Delivery

Energy Supply

Environmental benefits and

energy security

Energy savings and reliability, green power

Capacity, improved system

performance, T&D benefits

Capacity and energy sales


Unconstrained “Laissez-Faire” Market - DER owners are free to enter into a number of bilateral contracts with energy supply and delivery companies and/pr consumers.


68

Value Network Value Convergence

Competition

See other business models

Structure of Profit Potential

The aggregate DER values per DER unit has to be greater than the cost of the DER plus any transaction cost. Key Success Factors

• Availability of reliable DER• Availability of multiple customers

Operator Aggregator Sales and MarketingVerifyOwnership/

Financing

Green


Fuel Supply and Delivery Service

Ownership/ Financing Operator

Operator AggregatorOwnership/ Financing

Ownership/Financing Operator BrokerAggregator

Capacity

Energy Delivery

Broker

• Energy Consumers

• Energy Suppliers

• Energy Delivery

• Society

Value Chain

Energy Cost Saver and Perfect Power


70

Combining the ratings provided, the energy cost saver value network was viewed most favorably when applied against CEC’s CA priorities.

Very Positive: ++ Positive: + Neutral: ~Negative: - Very Negative: --


PIER Objectives Energy Cost

Saver

Low Cost Power ++


Convergence

Reliable Power

Reduce Environmental

Impact

Increased Safety

Value Networks Fit Assessment

Perfect Power

- + +

+ ++ + +

+ + +++

~ ~ ~ ~~

+ +

~

-

~

+

+

71

Energy Cost Saver

• Low cost power is the key objective of this value network and clearly reinforces this priority. Costs will certainly be reduced for customers that choose DR.

• An increase in supply typically results in price reductions.

Reduce Environmental Impact

Low Cost Power

• Reliability is a tangential benefit for the DR customer in this value network unless the way the customer achieves lower costs is through avoiding costly interruptions.

• It improves reliability for individual customers, but not for the system as a whole. There is an indirect benefit, since more DR leads would reduce demand on the system and allow it to operate further from the margins.However, there are network control issues for system stability.

• If you have it grid connected, you may have some benefits if the interconnection is sound.

Reliable Power

• Co-generation and PV applications are environmentally friendly• It would vary, but there should be a net benefit since the

technologies tend to be clean.

++ +

+


Increased Safety

• No direct linkage• Insignificant impact

~

72

Perfect Power

• You have to do more to make sure you’re at the high 9’s level and it’ll cost you.


Low Cost Power

• Helps individuals willing to pay extra.• This is the whole purpose for customers willing to pay for the

benefit. But for customers not participating in this value network, no benefit is likely to be derived.

• By definition it is good for the consumer, but does not help others who are not paying for it.

• Very positive for a narrow select group of customers.• It’s most positive for those who have buy into it, and neutral for

those who don’t.

Reliable Power

• Varies depending on the technology selected (DER for prime power assumed).

• Potential benefit if efficient technologies are used

- ++

+


Increased Safety


~

73

Green Power

• It depends on how the incentives are structured, but it could increase power costs (particularly if there is a portfolio standard).

• Spread out over the entire customer base, the negative impact may be minimal.


Low Cost Power

• Could be favorable if you add lots of renewable, but it’s not really the point.

• If there’s DER, it improves reliability regardless what type of DER. DER relieves stress on the grid.

• Green power may be difficult to dispatch, so no there may be no gains in reliability benefits

• The stuff throws power on at the wrong times, sometimes

Reliable Power

• Reducing environmental impact is the key point of the value network.

• For those who want it, this value network serves them very well.

- ~

++


Increased Safety


~

74

Energy Supply and Delivery

• This value network should contribute slightly lower cost.• If it doesn’t save money, you’re not going to do it. It has to have

some economic value.• DER would provide the lowest cost T&D infrastructure upgrades

and you’d probably save some money.


Low Cost Power

• Like energy cost-saver, more onsite generation should improve reliability. This one has greater propensity for system-wide benefits.

• It should tend to improve the overall reliability of the grid, depending on how it’s used.

Reliable Power

• You will also reduce usage of must-run plants that are older and less efficient.

+ +

+


Increased Safety


~

75

DER Exchange

• Drives peak power prices down, but only peak power prices.• In the long run it should improve competition, it could lower

prices.• You’re lowering transaction costs and increasing the value of

the asset to the extent that those costs can be passed on to others.

• Trade other attributes besides cost (e.g., emissions, T&D benefits)


Low Cost Power

• To the extent that it adds power when required, it contributes to reliability. It prevents blackouts like in CA.

Reliable Power

• You’re able to better utilize DER to reduce environmental impact• Green credit trading will be beneficial.

+ +

+


Increased Safety


~

76

Value Convergence

• It will bring high value power, but not it is not necessarily low cost

• With energy cost saver and perfect power as the main drivers, you’re going to end up with a neutral.

Reduce Environmental Impact Increased Safety

Low Cost Power

• To the extent to which you’ve put the resource out there, you’re probably reducing congestion and taking someone off the grid.

Reliable Power

• Including green trading would be a plus, however, you don’t know what you’re up against.


+ +

+ ~


77

Appendix

5 Appendix

5.2

Summary of Value Networks Assessment

Assessment Tables of Research Initiatives

5.1

78

Competitive Impact

Stage of Development Size of Gap

Rating

Demonstration

• The reduced cost and time for interconnecting and contracting is critical for the success of the energy cost saver value network.

Interconnection Initiative #1: Standardize technical requirements, processes and contracts for interconnection (including networked systems and power export) that allow for innovative solutions

Base Little or No Gap

Rationale


• Cost reduction is less critical, but reducing costs helps new perfect power solutions.

• Cost reduction is not the most important element, but reducing costs would help green power providers. Also power export will be important to some renewable projects.

• Utilities control the assets and the interconnection, so they have more direct control over their own standards.

• There is likely to be a net export of power for some DER in this value network. Standardized technical requirements, processes and contracts for power export are critical for the success of a DER exchange.

• Standardization is not necessary; however, it helps or is necessary for several of the value networks that might come together in a Value Convergence value network.

Assumption: Standardization reduces the cost and time of interconnecting and contracting for export

Appendix Assessment Tables of Research Initiatives

ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

79

Competitive Impact


Rating

Demonstration

Interconnection Initiative #2: Understand the impact of and adopt new interconnection requirement

Base Significant

Rationale


• Adopting standards is not necessary; however, it helps or is critical for several of the value networks that might come together in a Value Convergence value network.

• Reduced cost and time for interconnecting and contracting is critical for the success of the energy cost saver value network. Reduced costs and time for interconnection will only be realized if standards are adopted.

• Cost reduction is less critical, but removing hassle helps new perfect power solutions

• Cost reduction is not the most important element, but removing hassle helps green power providers

• Utilities control the assets and the interconnection, so they can control their standards. Adopting new requirements and understanding the impact of new requirements should be relatively easy for utilities.

• Standardized technical requirements, processes and contracts for power export are critical for the success of a DER exchange

Assumption: Once interconnection requirements are standardized it will be necessary to understand the impact of these new requirements and to have them adopted by utilities, engineers and end-users.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

80

Competitive Impact


Rating

Commercial

Interconnection Initiative #3: Standardize designs around new requirements

Base Moderate

Rationale


• Standardization is not necessary; however, it helps or is critical for several of the value networks that might come together in a Value Convergence value network.

• The reduced cost of the equipment and installation is critical for the success of the energy cost saver value network

• Cost reduction, by itself, is not an important objective for perfect power

• Cost reduction is not the most important element, but is helpful

• Standardized designs reduce the cost of servicing the interconnection equipment within the utility’s service territory

• Interconnection designs built around common standards are critical for the success of a DER exchange

Assumption: Standardized designs reduce the cost of interconnection components, packages and installations


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

81

Competitive Impact


Rating

Demonstration

Interconnection Initiative #4: Type testing and certification of interconnection solutions

Key Moderate

Rationale


• Type testing and certification is not necessary; however, it helps several of the value networks that might come together in a Value Convergence value network.

• Type testing and certification would be helpful to reduce time and costs for interconnection, however, it is not the only solution.

• Cost reduction, by itself, is not an important objective for perfect power

• Cost reduction of interconnection and speed of acceptance would be helpful.

• Type testing is a less important initiative for utilities since they control the interconnection; however, may be helpful in cost reduction/

• Type testing and certification would be helpful to reduce time and costs for interconnection, however, it is not the only solution.

Assumption: Type testing would allow for more standardized designs and faster acceptance of interconnection solutions by utilities. This would reduce time and costs.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

82

Competitive Impact


Rating

Demonstration

Interconnection Initiative #5: Develop guidelines and best practices for interconnection

Base Moderate

Rationale


• Helps several of the value networks

• Reduced cost and time is critical for energy cost saver value network, particularly for the average end-user who may only limited numbers of interconnections.

• Utilities can make their own guidelines for their own use within their system.

• Reduced costs and hassles will increase participation and make the exchange more efficient

• Cost reduction is not critical, but removing hassle helps new perfect power solutions

• Reduced costs and hassles improve green power’s appeal

Assumption: Guidelines and best practices are a necessary part of deploying new interconnection requirements. They should reduce time and costs of interconnection while ensuring safety.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

83

Competitive Impact


Rating

Development

Interconnection Initiative #6: Modify standardized requirements and standardized designs based on modeling, testing and field experience

Base Moderate

Rationale


• Is unimportant for several of the value networks

• Reduced cost, but one-step removed from initiatives 1, 2, and 3

• One-step removed from initiatives 1, 2 and 3, which only partially address this value network

• Cost reduction is helpful

• Cost reduction, by itself, is unimportant for perfect power

• Reduced cost, but one-step removed from initiatives 1, 2, and 3

Assumption: Continuous improvement of initiatives 1, 2 and 3


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

84

Competitive Impact


Rating

Demonstration

Interconnection Initiative #7: Educate stakeholders on new requirements, contracts and processes

Base Moderate

Rationale



• Educated consumer and installation/service infrastructure is critical for the success of a low-cost solution

• Utilities can make their own guidelines for their own use within their system

• Education on interconnection helps, but reduced transaction cost is not as critical for this value network

• Education on interconnection helps, but reduced transaction cost is not as critical for this value network

• Education will create a larger pool of DER users who might use a DER exchange

Assumption: New streamlined requirements, contracts and processes will not provide any benefit to DER unless the stakeholders are aware of these changes. Educated customers result in: reduced confusion, uncertainty and perceived risk of using DER; lower transaction cost for successful projects.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

85

Competitive Impact


Rating

Development

Interconnection Initiative #8: Develop istandardized products for small DER

Base/Key Moderate

Rationale



• Inexpensive, standardized interconnection solutions are critical for small, energy cost saving DER to work

• Utilities would tend not to use small DER as a solution

• Although cost reduction is not a critical element of this value network, an inexpensive standardized product at the small size-range would help

• Interconnection cost reduction is less important, but green power solutions often fall in the small size range

• Cost reduction of smaller DER will create a larger pool of users who might use a DER exchange

Assumption: The smaller the DER the more costly is the interconnection on $/kw basis. Developing standardized, inexpensive interconnection products will be critical for small DER


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

86

Competitive Impact


Rating

Commercial

Interconnection Initiative #9: Reduce costs of interconnection components

Key Moderate

Rationale


• Helps several of the value networks that need cost reduction, whose value converges

• Cost reduction is critical for this value network

• Cost reduction helps

• Cost reduction is of low importance



Assumption: Reducing the costs of interconnection components (including power electronics) will reduce the overall costs of interconnection.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

87

Competitive Impact


Rating

Commercial

Interconnection Initiative #10: Improved reliability and performance of interconnection components (e.g., power electronics)

Key Moderate

Rationale



• Improved performance helps, but is not the critical element to this value network

• High reliability is critical for utilities, who may be replacing or supplementing highly reliable T&D equipment with DER

• High reliability and performance is critical to this value network



Assumption: Improving interconnection component performance and reliability (including power electronics) would improve the reliability of DER.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

88

Competitive Impact


Rating

Demonstration/ Commercial

Interconnection Initiative #11: Integrate interconnection functions with other DER functions

Key Moderate

Rationale



• Low-cost equipment and installation is important

• Cost is not an important factor• More limited opportunities to integrate functions

• Already doing that now, particularly integrating power electronics with interconnection

• Cost is not the key factor, but it helps. • There are opportunities to integrate the utility functions and communications and control systems with the

interconnection solutions.

• Helpful to reduce costs. • There are opportunities to integrate the functions of a DER exchange with the interconnection, metering,

communications and power conversion functions.

Assumption: Integrating interconnection functions with other DER functions (including power conversion, metering and communications) could simplify installations and provide for cost reductions. There may be particular opportunities to do this with power electronics.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

89

Competitive Impact


Rating

Demonstration/ Commercial

Interconnection Initiative #12: Turnkey solutions that integrate DER functions

Key Moderate

Rationale


• See #11

• See #11

• See #11

• See #11

• See #11

• See #11

Assumption: Similar to Initiative #11, but uses an engineering solution rather than a product solution. In #11, the integration is done within the product, in this initiative it is done by a systems integrator who engineers a low cost solution that integrates many DER functions.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

90

DevelopmentCompetitive

ImpactStage of

Development Size of Gap

Rating

Interconnection Initiative #13: Develop new technologies that would eliminate or reduce some of the costs of interconnection

Pacing Moderate

Rationale


• Value convergence is likely to require interconnection solutions that provide greater functionality to work across value networks.

• Low-cost equipment is critical

• Cost is not an important factor

• Cost is not the key factor, but it helps



Assumption: R&D into new interconnection technologies could potentially lead to eliminating some of the requirements for interconnection or reduce costs. For example, a new fault sensing device that was more accurate and reliable than current approaches. Also broadening the functionality of interconnection products.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

91

DemonstrationCompetitive

ImpactStage of


Rating

Interconnection Initiative #14: Develop test protocols for compatibility and power quality testing of DER

Key Moderate

Rationale



• A reduction in power quality for end-users would not acceptable no matter the cost savings. Power quality and compatibility concerns need to be addressed

• Power quality is fundamental to this value network

• Power quality and compatibility are not critical, but they are helpful

• Power quality and compatibility testing is not critical, but it is helpful

• Power quality and compatibility are not critical, but they are helpful

Assumption: This initiative would ensure that DER is compatible with end-use devices and not have a negative impact on a customer’s power quality.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

92


ImpactStage of


Rating

Interconnection Initiative #15: Test and understand compatibility and power quality issues

Key Moderate

Rationale



• A reduction in power quality for end-users would not acceptable no matter the cost savings. Power quality and compatibility concerns need to be addressed

• Power quality is critical for value network

• Power quality and compatibility are not critical, but they help


• Power quality and compatibility are not critical, but they help

Assumption: Follow on to Initiative #14


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

93

ResearchCompetitive

ImpactStage of


Rating

Grid Effects Initiative #1: Model and analyze the grid with varying levels of DER penetration

Pacing/Emerging Moderate

Rationale



• Utility comfort with DER is needed to allow for implementation

• Often has no impact on the grid

• Utility comfort with DER eases green DER implementation

• Utilities understand how DER can be used as a solution

• Utility comfort with DER eases implementation

Assumption: Modeling and analyzing the grid with varying levels of DER penetration is necessary to understand positive and negative impacts. This will allow DER owners and utilities to make changes to the DER and the power system where there is a negative impact. It will also allow utilities to become more comfortable that DER provides benefit. It will also enable utilities to identify ways for DER to benefit their operations and eventually provide financial incentives to DER owners that provide these benefits.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

94


ImpactStage of


Rating

Grid Effects Initiative #2: Demonstrate and test varying levels of DER penetration in a distribution system


Rationale





• Utility comfort with DER eases its implementation

• Utilities understand how DER can be used as a solution

• Utility comfort with DER eases its implementation

Assumption: Related to Initiative #1, but goes the next step


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

95

CommercialCompetitive

ImpactStage of


Rating

Grid Effects Initiative #3: Modify distribution system design approaches


Rationale



• Distribution system designs that incorporate DER could encourage more customer sited DER.

• More locations where DER is possible

• Distribution system designs that incorporate DER could encourage more customer sited DER. More locations where DER is possible

• To unlock the full value of DER, utilities would need new approaches to distribution system design that incorporates DER as a distribution solution.

• Necessary to extract the locational value of DER

Assumption: A distributed utility paradigm would require new approaches to the design of distribution systems.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

96

ResearchCompetitive

ImpactStage of


Rating

Grid Effects Initiative #4: Develop models to understand system impacts

Pacing Moderate

Rationale



• Could reduce the time to interconnect



• Utilities would have a tool to understand how DER can be used as a solution

• It is critical that DER doesn’t negatively impact safety. In addition, this value network also could be providing power system benefits to wires companies

Assumption: With system impact models, utilities could quickly study the impact of a DER installation on their systems and understand if it could be beneficial. This would reduce the interconnection costs for the DER installation while ensuring the same level of safety.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

97


ImpactStage of


Rating

Grid Effects Initiative #5: Develop software to facilitate system impact studies

Pacing Moderate

Rationale


Assumption: Developing software will further increase the speed of installation and could potentially lead to standardization across utilities.





• Utilities would have a tool to understand how DER can be used as a solution

• This value network also could be providing power system benefits to wires companies


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

98


ImpactStage of


Rating

Grid Effects Initiative #6: Modify requirements for impact studies as appropriate

Pacing Moderate

Rationale



• Reduces cost, but only in some instances

• Often has no impact on the grid; cost is not primary issue




Assumption: Once grid effects are better understood and new tools are available for studying system impacts, the requirements for impact studies may be modified.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

99

Research/Development

Competitive Impact


Rating

Grid Effects Initiative #7: Model and analyze Microgrids

Emerging Little/No Gap

Rationale



• Microgrids could be a mode for ECS value network

• Microgrids are a helpful option for deploying perfect power

• Microgrids could be an important way to deploy and integrate renewable energy with end-use equipment and the power system

• Microgrids could be an option

• Microgrids are unlikely to access power markets

Assumption: Modeling and analyzing (including economics and business case) Microgrids would allow a better understanding of the value of Microgrids and deployment options.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

100


ImpactStage of


Rating

Emerging Significant

Rationale








Grid Effects Initiative #8: Demonstrate and test Microgrids Assumption: Related to Initiative #7. Demonstrating and testing microgrids would validate the benefits and uncover other barriers


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

101


ImpactStage of


Rating

Grid Effects Initiative #9: Develop design guidelines for microgrids

Emerging Moderate

Rationale








Assumption: Related to Initiatives #7 and #8


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

102

ResearchCompetitive

ImpactStage of


Rating

Grid Effects Initiative #10: Perform analysis on the information and data needs of wires companies

Pacing Moderate

Rationale



• It is helpful for this value network for the wires company to be comfortable with customer sited DER

• May be helpful in getting wires company comfortable with customer sited DER

• It is necessary for this value network for the wires company to be comfortable with customer sited DER

• DER has to be centrally monitored and maybe controlled in this value network.

• Critical for the operation of DER exchanges in validating the locational value of the DER

Assumption: Understanding the status of the DER that is operating in a utilities’ system would be necessary to ensure safety and to accurately capture and manage T&D benefits. This initiative would take the first step in identifying what information is needed by utilities with DER operating in their systems.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

103

Development/Demonstration

Competitive Impact


Rating

Grid Effect Initiative #11: Develop and demonstrate systems for wires companies to monitor DER

Pacing Moderate

Rationale


Assumption: This initiative would develop and demonstrate the system that will make the data identified in initiative #10 available


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence



• May be helpful in getting wires company comfortable with customer sited DER

• It is necessary for this value network for the wires company to be comfortable with customer sited DER

• DER has to be centrally monitored and maybe controlled in this value network.

• Critical for the operation of DER exchanges in validating the locational value of the DER

104


ImpactStage of


Rating

Grid Effect Initiative #12: Develop tools to evaluate DER solutions vs. traditional T&D investments

Pacing Moderate

Rationale


Assumption: This initiative would allow utilities to compare traditional T&D investments to DER solutions

• Helps several value networks


• Unimportant


• Necessary for wires companies to evaluate DER as option to traditional T&D solutions

• Necessary for wires companies to evaluate DER as option to traditional T&D solutions


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

105


ImpactStage of


Rating

Market Integration Initiative #1: Assess current wholesale market rules for applicability to DER

Pacing Significant

Rationale



• Ability to sell power helps to optimize the system because on-site generator is not constrained by on-site load shape

• Wholesale power not an important part of value network

• Ability to sell power helps to optimize the system because on-site generator is not constrained by on-site load shape and the profile of the green resource

• Wholesale markets will be the procurement source in ESD

• Critical for the operation of DER exchange

Assumption: Helps to facilitate an eventual wholesale market for DER power


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

106


ImpactStage of


Rating

Market Integration Initiative #2: Modify market rules as appropriate to reduce the participation costs (fees, metering, process) for DER

Pacing Significant

Rationale







Assumption: Helps to facilitate an eventual wholesale market for DER power


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

• Wholesale markets will be the procurement source in ESD

107


ImpactStage of


Rating

Pacing Significant

Rationale


• Necessary for several of the value networks

• A pilot program would be necessary for the residential model.

• Not likely to be impacted by a pilot program

• A pilot program would be useful to demonstrating the validity of the value network as well as creating the critical mass necessary for deployment of some models within this value network (for example, trading CO2 emissions credits)

• This value network is not likely to be successful on a large scale until a large, replicable demonstration is done

• Critical mass is necessary for the operation of DER exchange

Market Integration Initiative #3: Demonstrate viability of a value network through a replicable pilot program

Assumption: A large pilot program could jumpstart some value networks by creating critical mass. For example, the DER Exchange is likely to require a large number of participants to drive down the transaction costs of participating in an exchange. In addition a replicable pilot program may be necessary to demonstrate the validity of the some value networks. For example, if one utility could successful implement the Energy Supply & Delivery value network other utilities would be likely to follow.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

108


ImpactStage of


Rating

Pacing Moderate

Rationale






• Initiative is helpful for this value network


Market Integration Initiative #4: Integrate the required technologies to reduce the costs of participating in markets

Assumption: Integrating the required technologies for market participation (e.g. interconnection, metering, communications, control and software) could reduce the costs of participating in these markets.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

109


ImpactStage of


Rating

Market Integration Initiative #5: Assess requirements for tariffs or rates

Key Significant

Rationale


• Critical to allow values networks to converge

• Reasonable tariffs and rates (e.g., standby charges) are critical for the success of energy cost saver model

• Modification of rates and tariffs would be helpful

• Modification of rates and tariffs would be helpful

• Necessary for third party providers

• Reasonable tariffs and rates is necessary to increase the pool of participants in a DER exchange

Assumption: The value proposition of DER does not fit into most of the current rates and tariffs.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

110


ImpactStage of


Rating

Market Integration Initiative #6: Develop market mechanisms to capture and monetize additional DER benefits (e.g., T&D, reliability, environmental)

Base Significant

Rationale


• Allows for value convergence

• Necessary to unlock additional benefits and create motivation to address barriers

• Ability to capture additional benefits is helpful for the perfect power value network

• Ability to capture and monetize environmental benefits is important for the green power value network

• ES&D companies are able to capture additional benefits, however; the means for monetization is not clear

• This is the reason for the exchange

Assumption: Many of the values that DER claims are not currently captured or monetized under today’s market mechanisms. Many of the value networks would are built around these kinds of values (e.g. the Green Power value network).


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

111

ResearchCompetitive

ImpactStage of


Rating

Market Integration Initiative #7a: Launch a new market for DER that captures all the value generateda) start from scratch, develop the best market structure for DER new and in the future

Emerging Moderate

Rationale


• Developing the ideal market for DER will help all value networks


• Not applicable



• A new market system needs to be developed

Assumption: Creating a new market for DER from scratch would ensure that the value and costs of DER can be captured, monetized and allocated properly.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

112


ImpactStage of


Rating

Emerging Moderate

Rationale




• Not applicable




Market Integration Initiative #7b: Launch a new market for DER that captures all the value generatedb) assess the system requirements for communications, control, metering, software for billing and settlement



ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

113

Demonstration/Commercial

Competitive Impact


Rating

Emerging Moderate

Rationale




• Not applicable




Market Integration Initiative #7c: Launch a new market for DER that captures all the value generatedc) pilot and then launch



ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

114


ImpactStage of


Rating

Market Integration Initiative #8: Develop advanced control and optimization approaches and technologies (e.g., neural networks and intelligent software agents)

Emerging Moderate

Rationale



• One approach to this value network could be for centralized control by a third party



• ES&D companies will be controlling multiple units in the field

• Control and optimization of units selling into the exchange is very important

Assumption: More cost-effective control and system optimization technologies with increased functionality would optimize DER for the power system, the environment, the customer and in response to market conditions.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

115


ImpactStage of


Rating

Market Integration Initiative #9: Demonstrate aggregation and control of DER

Pacing/Key Little or No Gap

Rationale






• ES&D companies will be controlling multiple units in the field

• Control of units selling into the exchange is very important

Assumption: Aggregating and controlling DER could optimize the value and economics of DER


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

116


Competitive Impact


Rating

Market Integration Initiative #10: Develop low cost metering

Pacing/Key Moderate

Rationale



• Metering and settlement could be used as part of this value network

• Not applicable in many cases

• Metering and settlement could be used as part of this value network

• Not Applicable

• Low cost, high quality metering for settlement is critical for DER exchange

Assumption: Low cost metering would reduce the overall costs of DER


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

117


Competitive Impact


Rating

Market Integration Initiative #11: Develop low cost communications and control software and sensors

Pacing/Key Moderate

Rationale


• Necessary to allow convergence

• Communications and centralized control could be used as part of this value network


• Communications and centralized control could be used as part of this value network

• Low cost communications and control would help coordinate multiple units in the field, but low cost is not the primary driver for this value network

• Communications and control are critical for DER exchange

Assumption: Low cost communications and control would reduce the overall costs for DER in response to price signals


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

118


ImpactStage of


Rating

Market Integration Initiative #12: Develop software to optimize DER in response to market price signals

Pacing Moderate

Rationale


• Dependent upon market structure, software is might be necessary to quickly (real time in some cases) determine the best operating modes



• Market signal optimization could be used as part of this value network



Assumption: This initiative would develop software that optimizes a DER facility’s operation and facilitates it’s response to price signals.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

119


ImpactStage of


Rating

Market Integration Initiative #13 : Develop standards/protocols for communications/ controls

Base Significant

Rationale



• Communications and controls could be used as part of this value network


• Communications and controls could be used as part of this value network

• Common standards and protocols would facilitate the use of DER in the utility system

• Standards and protocols are critical for DER exchange

Assumption: Standards and protocols compatible with utility communication and control platforms would facilitate the widespread deployment by utilities. It could also reduce costs were DER is networked.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

120


ImpactStage of


Rating

Market Integration Initiative #14: Develop advanced storage to optimize DER in response to market signals

Pacing Significant

Rationale



• Storage is likely to be an energy cost saver option

• Advanced storage could be part of a perfect power solution

• Advanced storage could eliminate the dispatch-ability shortcomings of many green power solutions

• Advanced storage helps bolster system reliability in some cases

• Another important resource for the DER exchange

Assumption: Advanced storage technology would provide renewable energy with greater flexibility and could also be a stand alone solution in response to price signals.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

121

Competitive Impact


Rating

Research / Development

• Cost is the key driver for this value network.

Technologies and Products Initiative #1: Major reductions of equipment and installation costs of DER technologies

Pacing Moderate

Rationale


• Not the main driver for this value network. Customers are less price sensitive, reducing costs will not likely have a major impact.

• Cost is not the most important element but lower costs will make green power accessible to more customers.

• Reduced costs will make DER more attractive compared to traditional solutions

• A critical mass of DER customers is needed to participate in a DER exchange. Reduced equipment costs increases the number of consumers attracted to DER and thus creates for a more efficient exchange.

• Helps most of the value networks.

Assumption: Reducing equipment costs for emerging technologies (e.g. fuel cells) is necessary to make them cost competitive compared to traditional solutions. More established technologies (PV, recips) would increase their market share if costs could be reduced. In addition to equipment costs, other installation costs (e.g. balance of plant, engineering costs) will also make DER more attractive.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

122

Rating

Technologies and Products Initiative #2: Major increments in efficiency of DER technologies

Rationale


Assumption: Better efficiency reduces fuel costs for fossil-based technologies (recips, gas turbines, microturbines) and will make these technologies more attractive especially if efficiency increases come without a capital cost penalty. Increased efficiency will also improve the environmental signature of these technologies.

Competitive Impact

Stage of Development Size of GapResearch /

Development Pacing Moderate

• Cost is the key driver for this value network. This value network would probably rely on fossil-based technologies.

• Not the main driver.

• Improving efficiency will make fossil-based technologies more attractive; however, improvements in electrical efficiency will not lead to overall improved efficiencies for cogen systems.

• This value network is most likely to rely on fossil-based technologies. Increased efficiency will make them more attractive on a cost and environmental basis. However, many of the opportunities will be capacity plays making operating costs including fuel less important.

• Better economics increases the number of consumers attracted to DER and thus creates for a more efficient exchange.

• Helps most of the value networks.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

123

Rating

• To meet the cost requirements for this value network, established fossil-based technologies are most likely to be used.

Technologies and Products Initiative #3: Major reductions of emissions from DER technologies

Rationale


• To achieve the reliability necessary for this value network, established fossil-based technologies are most likely to be used.

• While some current DER technologies are clean, broader acceptance of this value network would require significant reductions of emissions from other DER technologies that are not very clean today.

• To meet the cost and reliability requirements for this value network, recip engines and gas turbines are mostly likely to be used.

• Reducing emissions will allow more DER to participate for more hours in an exchange.

• Necessary for several value networks.

Assumption: Established fossil-based DER technologies (recip engines and gas turbines)are going to be challenged to meet increasingly stringent air permitting requirements. Without improved emissions these technologies will be effectively locked out of the market.

Competitive Impact

Stage of Development Size of GapResearch /

Development Pacing Moderate


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

124

Competitive Impact


Rating


• Customers demand that DER solutions be at least as reliable as current solutions.

Technologies and Products Initiative #5: Improve and demonstrate increased reliability of DER technologies

Pacing / Key Moderate

Rationale


• Perfect power cannot be delivered without proven reliability.

• Green DER, particularly intermittent resource, are not likely to be relied upon as a primary power source. However, improving reliability would improve the attractiveness of these solutions.

• Reliability must be demonstrated for wires companies to seriously consider DER.

• Reliability is necessary given the financial exposure in energy markets.

• Necessary to most value networks

Assumption: Reliability is necessary if the DER is the primary source of power, is a reliability solution or is being relied upon to take risks in energy markets.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

125

Competitive Impact


Rating

Commercial

• Lack of a service infrastructure was a shortcoming of some early micro-cogeneration companies. Customers will demand high-quality, reliable service.

Technologies and Products Initiative #6: Develop robust service infrastructures

Key Moderate

Rationale


• The perfect power value proposition requires true 24/7 access to emergency service.

• Lack of a quality service infrastructure was a shortcoming of some of the early green DER companies.

• For this value network, service is strongly tied to reliability.

• For this value network, service is strongly tied to reliability.

• Necessary for all other value networks

Assumption: All DER will need preventive maintenance and will on occasion fail. Customers need to be confident that there is a robust after sales service infrastructure that will back up the product. A service infrastructure is also closely related to providing reliability and the perception of reliability. This will be a particular challenge for new technologies that are perceived as less reliable and where it may not be economically effective to have a service network in place given limited market penetration.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

126

Competitive Impact


Rating

Demonstration

• Zero energy buildings are not likely to lead to energy cost savings

Technologies and Products Initiative #7: Develop zero energy buildings

Pacing Significant

Rationale


• Zero energy buildings do not necessarily provide perfect power.

• Zero energy buildings may be one business model within this value network.

• Zero energy buildings are not a wholesale solution.

• These buildings will be providing export power that could be sold on an exchange.

• Unimportant to some value networks, helps others

Assumption: Zero energy buildings combine solar energy technology with energy-efficient construction techniques that have zero net annual need for non-renewable energy. At certain times a zero energy building will generate more power than it uses particularly during peak times.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

127

Competitive Impact


Rating

Commercial

• If economics are strong, then multiple and appropriate ownership structures will follow, not only from utilities

Regulatory/Institutional Initiative #8: Allow utility ownership

Pacing Significant

Rationale


• If economics are strong, then multiple and appropriate ownership structures will follow, not only from utilities

• Ownership structure does not have an impact, only generation techs used and their locations

It is difficult to create a business model for utilities without utility ownership

• Utility ownership could impede or negate the need for an exchange.

• Unimportant to most value networks

Assumption: It is not clear if utilities need to own DER to reap the benefits. There are other options like leasing or capacity contracts with the DG owner. It is important that utilities can control the DG and can be assured it will be available when needed and reliable.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

128

Competitive Impact


Rating

Commercial

• Helps eliminate charges and improves the economics.

Regulatory/Institutional Initiative #9: Exempt DER from exit fees or standby charges

Pacing Significant

Rationale


• Not necessary for this value network


• Irrelevant to wires companies


• Helps most of the value networks

Assumption: Exempting DER from exit fees and standby charges improves the economics for DER owners.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

129

Competitive Impact


Rating

Commercial

• It is difficult to assess the economics of a project if rules of the game keep changing.

Regulatory/Institutional Initiative #10: Reduce regulatory uncertainty

Base Significant

Rationale


• Value network is not impacted by regulatory actions

• It is difficult to make investments if its unclear how price signals will change and when and if subsidies or other incentives will end.

• Uncertainty makes it difficult for wires companies to plan and consider DER.

• Customers are unwilling to invest in the equipment necessary to participate in an exchange if it is unclear how long the exchange will be operating

• Important to most the value networks

Assumption: Regulatory uncertainty makes it difficult for customers to buy products and services and for companies to invest in DER businesses or initiatives.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

130

Competitive Impact


Rating

Commercial

• One way to deploy this value network

Regulatory/Institutional Initiative #11: Create CA DG municipal utilities, DG power authority and/or DG coop

Pacing Significant

Rationale


• Irrelevant to the underlying quality/reliability

• A DG muni/power authority is one possible business model in this value network.



• Helps most value networks

Assumption: A utility or power authority could be created that focused on DER that provided economic, environmental, and reliability benefits to its constituents.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

131

Competitive Impact


Rating

Commercial

• Subsidies would improve the economics for individual projects.

Regulatory/Institutional Initiative #12: Provide preferences or subsidies for clean DER

Key Little / No gap

Rationale


• Irrelevant

• In the short-term, subsidies are necessary and take the place of price signals.

• Could improve economics for a generation portfolio weighted towards clean power

• Subsidies could enable green power that would be traded in the exchange.

• Necessary for the green power value network

Assumption: In the short-term subsidies improve the economics for DER projects. However, they are risky for companies seeking to build sustainable businesses.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

132

Competitive Impact


Rating

Commercial

• DER deployed in this value network is likely to be installed in buildings

Regulatory/Institutional Initiative #13: Revise building codes and standards for DG

Base Significant

Rationale


• Not necessary for this value network

• Eliminates barriers to DER applications installed in buildings

• DER used in this value network is less likely to be under most building codes and standards

• Eliminates barriers to DER applications installed in buildings

• Eliminates barriers to DER applications under all of the value networks

Assumption: Building codes and standards ignore DER technologies in many instances and may be creating unnecessary costs and increasing project development time.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

133

Competitive Impact


Rating

Commercial

Regulatory/Institutional Initiative #14: DG Enterprise zones

Base Significant

Rationale


Assumption: DG Enterprise zones would create tax incentives or other subsidies to DER that is installed in certain locations (T&D constrained areas, environmental, economic development).

• Enterprise zones provide additional economic incentives

• Irrelevant to value network

• Enterprise zones provide additional economic incentives particularly for green technologies.

• Enterprise zones are one particular business model within this value network.

• Enterprise zones provide additional economic incentives that would increase the base of DER that could participate in the exchange.

• Helpful to most value networks


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

134

Competitive Impact


Rating

Commercial

• A robust natural gas infrastructure would increase the number of potential sites.

Fuel Infrastructure Initiative #15: Develop a robust natural gas infrastructure for delivery with sufficient capacity

Base Moderate

Rationale


• A high penetration of DER is not likely in this value network, however it is likely to use natural gas and a reliable fuel supply will be necessary to ensure perfect power can be delivered.

• Natural gas technologies are only one in a portfolio.



• Helps most value networks

Assumption: Natural gas is not available at all potential DER sites. This limits the technical market. Given a high penetration of DER, improvements/increased capacity in the natural gas system might be required.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

135

Competitive Impact


Rating

Research

• Helpful where fuel cells and ic engines are installed, however, penetration is likely to be low.

Fuel Infrastructure Initiative #16: Develop a hydrogen infrastructure

Emerging Significant

Rationale



• Helpful where fuel cells are installed



• Helpful to most value networks

Assumption: A hydrogen infrastructure would enable fuel cells that do not have reformer capability.


ValueNetwork

Energy Cost Saver

Perfect Power

Green Power

Energy Supply

and Delivery

DER Exchange

ValueConvergence

0 identifying distributed energy resources research priorities through emerging value networks 2005...

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